Questions to ask before Buying a Franchise

05
Nov, 2012
Monday - 10:10

CHECKLIST OF QUESTIONS TO ANSWER BEFORE YOU BUY A FRANCHISE?
Here are some useful questions you should get answers to before deciding which franchise is best for you:

Many franchise businesses are booming. Franchises for just about every conceivable kind of business are being sold in ever increasing numbers.

Many franchises are good businesses. They treat both the franchisor and the franchisee very well. Others are very one-sided. Still others are almost total rip-offs that trap one into paying more than the actual value of the business idea, equipment, or what ever it is they are trying to get you to buy.

Before putting any money into a franchise, you should investigate everything thoroughly. We've prepared a short list of questions you should be asking, and get satisfactory answers to before investing:

  1. Has your franchise lawyer studied the franchise contract, discussed it completely with you, and do you both approve it without reservations?
  2. Does the franchise require you to take any steps which are either illegal or even border on illegal, or are otherwise questionable or unwise in your Province?
  3. Does the franchise give you an exclusive territory for the length of the franchise period, or can the franchisor sell a second or third franchise in your territory?
  4. Is this franchisor connected in any way with any other franchise company handling similar products or services?
  5. If you answered yes to the above question, what is your protection against the second franchising company?
  6. Under what circumstances can you end the franchise contract, and at what costs to you?
  7. If you sell your franchise, will you be compensated for your goodwill or will it be lost to you?
  8. How many years has the firm offering you the franchise been in operation?
  9. Does the company offering you this franchise have a reputation for honesty and fair dealing among its franchisees?
  10. Has the franchisor shown you any certified figures indicating exact net profits of one or more members, and have you personally confirmed these figures?
  11. Will the franchisor assist you with:
    a) A management training program; b) An employee training program; c) A public relations and advertising program; d) Capital; e) Credit; f) Merchandising ideas?
  12. If needed, will the franchisor assist you in locating a suitable location for your business?
  13. Is the franchising company adequately funded so that it can carry out its expansion and support plans?
  14. Does the franchisor have experienced management that is trained in-depth ans willing to help you?
  15. What does the franchisor do for you that you cannot do yourself?
  16. Has the franchisor done his due diligence on you to assure itself that you can successfully operate at a profit to both of you?
  17. Does your Province have a law regulating the sale of franchises?
  18. Has the franchisor complied with all applicable laws to your satisfaction?
  19. How much equity capital will you need to purchase the franchise and operate it until your income equals your expenses?

If you can get the answers to each of these questions, and those answers satisfy you, then you're probably thinking about buying a pretty good franchise deal. However, if you're in doubt about any of these points, be sure to check it out and know the answers for certain before you invest or sign anything.

Buying a franchise can give you a measure of security, and in some cases, sure-fire profits. Business surveys show that fewer than 20 percent of all new franchised businesses fail. This is in comparison to a 60 to 80 percent failure rate for all new businesses started in this country each year.

Information regarding specific franchising ideas can be found in the franchising directories, which are generally available online and on www.franhcisecanada.com. Often there will be a notice posted in franchise outlets themselves.

If you can afford the entry into this business, statistics are on your side. You are now armed with some caution... go ahead and sign!

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